If I Pay Back Taxes on a Property Do I Own It?

We’re often asked how to bid for unpaid property tax bills at a tax sale. This correspondent is wondering how the system works, and if he pays back taxes on a piece of real estate would he then become the owner of the property.

Q: If I pay the back taxes on a property do I own it? My parents are about to lose our family home at a tax sale. I plan to go to the tax auction to bid on the sale. Would I be the sole owner of this property if I win the tax auction? I don’t want to share the house with them if I win.

A: There’s clearly a lot to unpack in your short email. We’ll get to the emotional baggage in a moment.

Here’s a little background on tax auctions. Usually when a homeowner fails to pay his or her real estate taxes, the taxing body has the right to sell the home to satisfy the debt owed to the government. The theory is that it’s of utmost importance that governments receive the funding they need and if homeowners fail to pay the amounts they owe, the government can sell the property and receive payment for the delinquent amount.

While that doesn’t sound particularly complicated, in practice the process can be. When the taxing body (often, the tax assessor) sends out tax bills, the homeowner has a certain amount of time to pay the bill. Once that real estate tax bill remains unpaid for a certain amount of time, the taxing body can sent out a notice to the homeowner that the home will be sold for unpaid real estate taxes. The taxing body may then publish the owner’s name and the addresses of properties that are due up for the tax sale at a specific date in the future.

Timing is a critical factor. For example, if the taxing body sends out real estate tax bills on January 1 and that bill is due on February 1, if the bill remains unpaid, the homeowner will have to pay interest on the amount owed on the bill at a rate of, say, 18 percent per year. That’s a pretty high interest rate. Until the homeowner pays the bill, the unpaid amount continues to accrue interest at that rate. The homeowner can pay off the amount owed at any time along with the interest. As the bill remains unpaid, the next step is for the taxing body to publish the delinquent tax bills to give public notice of all those unpaid tax bills.

The homeowner has about a year or two, depending on the jurisdiction, before the taxing body sets up the tax sale. At the tax sale, the amount owed to the taxing body plus any interest that has accrued, is sold. Anyone can bid to buy the unpaid taxes, and there is generally an auction so that the municipality can get the most money possible.

For many people, this is confusing: Why would anybody bid an amount that might differ from the amount the homeowner owes?

A tax buyer may have different investment opportunities. Let’s say the tax buyer has $10,000 to invest and the homeowner owes $10,000 in back taxes. The tax buyer can put his money in a savings account and make almost no money or can put the money in the stock market and risk the ups and downs of the market, or can bid on the $10,000 tax bill owed and if he or she wins the action, might make up to 18 percent on that money. Other people may also bid on the tax bill, some might bid more than the $10,000 in the hopes of winning the auction. They may earn less than the 18 percent, but may still get a good enough return to make the whole endeavor worthwhile.

Here’s another point of confusion: When the tax buyer wins the auction, the property itself does not change hands. What the tax buyer has won is the right to collect back taxes plus interest and that can lead to owning the property down the line. The homeowner still has the right to come forward and pay off the debt owed for the unpaid tax amount plus any accrued interest.

If the homeowners does pay off the amount owed along with interest and other penalties, the tax buyer gets his money back along with interest. But if the homebuyer fails to come forward at any time, eventually the tax buyer will get title to the home. In some states it can take several years before the tax buyer gets title to the property.

And, if the tax buyer does get title to the property and the homeowner has taken no action to save the property, the tax buyer will become the exclusive owner of the property and can even kick out people living in the property and move into the property himself.

In your question, you indicated that you’d want to buy the taxes at the tax sale and end up owning the property. You should know that if you bid on the tax sale and win, your name will appear as the winner and your name will show up as the tax buyer for the property.

It sounds as though the relationship between you and your family is problematic. You should know that because your name as the winner will be in the public domain, it seems likely that someone in the family will find out that the taxes were sold and who bought them. If and when they pay up and redeem the property, they finding out that you knew and said nothing to them. And, that could present another difficult situation.

We don’t know your motives or what your family interactions are so we can’t address those in this answer. Good luck.

16 Comments

I think it’s a very thoughtful and charitable thing to do, for the person who’s wanting to buy the home for his parents. It doesn’t sound like he/she is having family problems. It’s quite typical of young people nowadays to want to live on their own and not with their parents. It also seems the person understands the parents remain in the home if he does not want to live with them. The explanation is excellent. I often wondered about unpaid house taxes and now I know how that works. Seems a great way to make a high interest rate, with the possibility (even if remote) of acquiring the home in the future. Thank you!

I think what you’re talking about is when the Sheriff auctions off the back taxes of a property. Typically, the owner has two years (sometimes less, sometimes more) to repay the taxes plus interest that the buyer of the back taxes sets. Then, the owner would get the property back. If the owner doesn’t repay the back taxes plus interest and bring the property current, then the person who bought the back taxes would own the property outright.

So, no, paying both years of property taxes doesn’t make the property yours. You have to wait to see if the owner can repay you or not. Hope this helps.

So here in Oklahoma there’s some property that’s 3 years behind in taxes and if I pay that it’s not at the sheriff’s auction yet how long before I know that I own it. because I don’t think these people are going to come get their property and if I clean the property up do I get my money back on cleaning it up to or do I have to wait

I am no expert but you just posted this today and reading it and having researched this somewhat I will give my answer. If you pay the 3 years of back taxes you now have the right to that tax money you paid…..you do not own the house and the home owner can come forward repaying that tax money you paid plus the interest and the owner will maintain ownership. It seems after you have paid the taxes that other person still has 1-2 years he can repay the back taxes so you would need to wait lets say another 2 years after you paid before the property becomes yours. As far as cleaning up the property no I do not believe you would get any money back for that.
The thing about all this I am confused about is I seem to understand having read that you pay the back taxes and then the home still later goes up for auction I assume yet another party could come in and buy stepping over you. I think this person would then need to repay you the taxes.
By paying the taxes you only hold the right to the tax money paid…..that is what you are paying for the right to the taxes paid and to be repaid with interest.
These things are not as simple as ask and read one story you need to thoroughly research and ask questions to understand these points and check with local offices to understand local laws regarding.

Harold: Precisely. When you pay the back taxes, the deal you make is to be repaid the cash you’re out plus interest (that’s the return on your investment). If the owner of the property can’t scrape together enough cash at the end of a two years (the typical timeframe), then you get the property instead.

Vickie, please talk to the local county assessor’s office to find out the rules that apply to your area. Harold is right – laws are different everywhere, so you want to make sure you understand what you’re getting into.

There is a property that I am interested in, and it seems to be in the pre-foreclosure state because I have not seen it up for foreclosure auction.

The house has a lock box on it (It seems like the real estate agent just put a lockbox on it because it was vacant, and there is no contact info.). I looked up the tax records and the owner also owes a couple of thousand in taxes.

Should I pay the taxes on it or do you have to wait for it to go to the tax deed sale to have any rights to the property? I am still looking for the owner.

My aunt’s house will be going into foreclosure unless back taxes is paid by making arrangements with the lien holder for payment.. Outrageous amounts. A month.. Should I pay that for a year and clear the title

there is property beside mine now that has been abandoned for several years, taxes have not been paid in 8 to 10 years, I don’t understand why it hasn’t gone to auction, but none the less if someone pays the taxes for it and wait the time, can it become theirs?

the house I am renting is about to be foreclosed on due to 2 years of unpaid taxes. They owe $8,318.14. If I pay the taxes that are owed…. is it possible for me to then own the home and do I have to continue paying rent? My landlord died and his family responsible for the property. I pay my rent to his estate. I believe the family is letting the house go intentionally, but I really would like to purchase the house myself. They do not have a mortgage on the house as the house is paid off and was owned by the landlord. What are my options? I am on a month to month lease.

Have you spoken with the family about buying the property? The property doesn’t sound as though it’s being foreclosed on, since there isn’t a mortgage. More likely, it’s about to be sold for back taxes. Someone else is going to buy that property for $8,318.14, which are the taxes owed. If you go through the system, you’ll be fighting against a property tax buyer, who could bid up the tax amount beyond that.

Talk to you family and see if they’ll allow you to buy the house for a reasonable amount, and then you’ll take over all of the costs. Remind them that if they fail to pay the taxes owed, they’ll lose the property altogether.

Typically, the answer would be no. You have the right to redeem your taxes up through the redemption period. You should speak with your county assessor’s office to make sure you understand what your rights are. You may have to seek legal counsel.